Business Studies 4 Marks Question

There are various methods of floating new issues in the primary market:

1. Offer through Prospectus: Offer through prospectus is the most popular method of raising funds by public companies in the primary market. This involves inviting subscription from the public through issue of prospectus. A prospectus makes a direct appeal to investors to raise capital, through an advertisement in newspapers and magazines. The issues may be underwritten and also are required to be listed on at least one stock exchange.
2. Offer for Sale: Under this method securities are not issued directly to the public but are offered for sale through intermediaries like issuing houses or stock brokers. In this case, a company sells securities enbloc at an agreed price to brokers who, in turn, resell them to the investing public.
3. Private Placement: Private placement is the allotment of securities by a company to institutional investors and some selected individuals. It helps to raise capital more quickly than a public issue. Access to the primary market can be expensive on account of various mandatory and non-mandatory expenses. Some companies, therefore, cannot afford a public issue and choose to use private placement
4. Rights Issue: This is a privilege given to existing shareholders to subscribe to a new issue of shares according to the terms and conditions of the company. The shareholders are offered the ‘right’ to buy new shares in proportion to the number of shares they already possess.

1. Product designing and development:

• Product designing and development helps to make the product attractive to the target customers.
• A good design can improve performance of a product and also give it a competitive advantage in the market.

2. Standardisation and Grading:

• Standardisation ensures uniformity and consistency in output reducing the need for inspection and testing of the products.
• Grading ensures that the goods belong to a particular quality and helps in realising higher prices for better quality products.

Difference between marketing and selling are:

Basis	Marketing	Selling
Part of the process vs wider term	Marketing is a wider term consisting of number of activities like identification of customers needs, developing the products to satisfy those needs, fixing prices and persuading the potential buyers to buy the same.	Selling is a part of the process of marketing and is concerned with promoting and transferring possession and ownership of goods from the seller to the buyer.
Transfer to title vs satisfying customers needs	Marketing focuses on achieving maximum satisfaction of the customer’s needs.	Selling focuses on affecting transfer of title and possession of goods from sellers to consumers or users.
Profit through maximizing sales vs customer satisfaction	Aims at maximizing of customer satisfaction as a route to profit maximisation.	Selling aims at maximising profits through sales volume.
Start and end of activities	Marketing begins before production and continues even after the sale has taken place.	Selling begins after production and ends with the sale of goods.
Difference in the Emphasis	In marketing, the attempt is to develop the product and other strategies as per the customer needs.	In selling, the emphasis is on bending the customer according to the product.
Difference in the Strategies	Marketing uses integrated marketing efforts involving strategies in respect of product, promotion, pricing and physical distribution.	Selling involves efforts like promotion and persuasion.

All four elements of marketing mix are described as under:

1. Product Mix: It refers to the combination of all decisions relating to product. These decisions are mainly with regard to dimensions of the product (Product line, Product Width, Line Length, Product Depth and Product consistency), its branding, packaging, labelling, colour, design, quality, size, after sale service, its weight etc. These decisions play an important role in attracting the customers to the product.
2. Price Mix: It refers to all those decisions which are concerned with the price fixation of any product or service. Determination of fair price of the product is a very important but difficult function of marketing manager. Fair price is that price which is acceptable both to the customers as well as producers. Price is one of the major factors which contribute a lot to finalise the deal between buyer and seller. Under price mix, besides fixing the price of the product or service, decisions regarding credit sale, discount, etc. are also included.
3. Promotion Mix: It refers to informing the customers about the product, persuading them to purchase these products. This job is done by the company through the medium of advertisement, personal selling, sales promotion and publicity. Decision with regard to all these factors directly influence the sale of the product.
4. Place Mix: It refers to the combination of all decisions relating to make products available to consumers. If the product is not available on right time, in right quantity and at right place then consumer will not be able to buy it. In such a situation, all activities of Marketing Mix will turn futile. So to make Marketing Mix a success, Place Mix is very important. To make the product reach the consumers the decisions regarding the following are included in ‘Place Mix’:

1. Channels of Distribution: It refers to that path through which products reach consumers. In this path many people and firms participate.
2. Physical Distribution: It involves decisions relating to the transportation, inventory, warehousing and order processing of goods.

Basis of Difference	Convenience Product	Shopping Product
Demand	Convenience products have a continuous and frequent demand.	Shopping products have a relatively less frequent demand.
Nature of Products	Essential commodities come under the category of convenience goods.	Generally, such goods are durable in nature.
Unit of Purchase and Price	These products are available in small units and have low unit price. Thereby, such products have low profit margin.	These products usually come in bigger units and have high unit prices. Thereby, the profit margin is also high.
Nature of Purchase	Such products are brought impulsively without devoting much time and effort.	Such products are not brought impulsively and the consumer devotes considerable time and effort to compare the price, quality, etc. of the product.
Example	Ice-creams, medicines, newspaper, stationary items.	Jewellery, furniture, clothes, etc.

Personal selling involves oral presentation of message in the form of conversation with one or more prospective customers for the purpose of making sales. It involves a face-to-face communication between a seller and a buyer. The persons who do the job of personal selling are called salesmen or sales representatives.
Benefits of personal selling in the economic progress of the society are:

1. Personal selling converts latent demand into effective demand: Personal selling converts latent demand into effective demand, which results in increase in sales thus bringing about economic growth.
2. Standardisation: Personal selling increases product standardisation and uniformity in consumption pattern.
3. Provides employment opportunities: It offers employment opportunities to the unemployed youth.

1. Zero level channel: It is a case where no intermediary is involved in between the producer and the customer. The producer directly sells to the customers. Mail order, Internet Selling, Door-to-door selling are major examples of direct selling. Bata sells its shoes directly to customer through its own stores.
2. One level channel: In this arrangement, one intermediary is used in-between the producer and the customer. The usual mode is to involve retailer in the chain. This is done usually for speciality goods like expensive watches or appliances where the producer sells its wares through a retailer.
3. Two level channel: The services of a wholesaler are taken along with that of the retailer. The manufacturer directly deals with the wholesaler and sells to him in bulk, who in turn sells to a large number of retailers in smaller quantities. This arrangement is widely used for convenience goods like soaps, tea, cigarettes, salt etc.
4. Three level channel: In this arrangement, one-tier is added by way of some middlemen like agents to the two level channel. This is usually done when the manufacturer cannot directly approach the wholesaler. Thus, the agent acts as a conduit between the producer and the wholesaler.

Physical distribution refers to movement of products from the place of production to the place of consumption.The following are the components of physical distribution:

1. Processing of Order: Processing of order comprises of a number of steps such as placement of order, transmission of the order by the intermediaries to the manufacturer, maintenance of inventory as per the requirement, delivery of goods, etc. As all such processes take time, a physical distribution system should be such that it should ensure speedy and proper order processing. Generally, there exists a direct relationship between speed and accuracy of order processing and customer satisfaction. Fast and accurate order processing results in greater consumer satisfaction.
2. Transportation of Products: Transportation of products refers to the physical movement of goods from the place where they are manufactured to the place where they are consumed. To make the goods physically available to the consumers they must be transported from the place of production to the place of consumption.
3. Warehousing: Warehousing refers to the process of storing the produced goods before the final act of sale. If a company has a larger number of warehouses, it will be able to readily provide the goods on time at different locations. However, maintaining warehouses involves its own cost. Thus, a company must weight the relative benefits and costs associated with warehousing and maintain a balance between the two as per the requirement.
4. Maintenance of Inventory: The firms maintain inventory so as to ensure timely supply of products. Similar to warehousing, maintenance of inventory also shares a positive relation with customer service. However, maintenance of inventory involves a cost as a huge amount of capital remains tied up in the stock unless it is sold. Thus, the firms must strike a balance between customer service and cost.

Basis of Difference	Product Concept	Production Concept
Belief	It was believed that consumers favoured, superior quality products and thereby, profits can be maximised by increasing the quality of the product.	It was believed that consumers favoured readily available and affordable products and thereby profits can be maximised by increasing the volume of production.
Focus of the business	Focus was on improving the quality of the product, adding new features, etc.	Focus was on enhancing the quantity of production and reducing the average cost of production.
Methodology	Emphasis on improving the features and quality of product.	Emphasis on improving the production efficiency of the business.

Activities/ Components of Physical Distribution:

1. Order processing: A good physical distribution system should provide for an accurate and speedy processing of orders, in the absence of which goods would reach the customers late or in wrong quantity or specifications.
2. Transportation: It is the means of carrying the goods and raw materials from the point of production to the point of sale. It is important because unless the goods are physically made available, the sale cannot be completed.

The name of this technique is ‘Quantity Gift’. Under it, some extra quantity of the main product is passed on as a gift to the customers.Following are the two other techniques of promotion mix:

1. Rebate: Under it, in order to clear the excess stock the products are offered at some reduced prices. For example, giving a rebate by a car manufacturer to the tune of ₹ 12,000 for a limited period of time.
2. Discount: Under this method, the customers are offered products on less than the listed price. For example, giving a discount of 30% on the sale of Liberty Shoes. Similarly, giving a discount of 50% + 40% by the KOUTONS.

The name of this technique is ‘Rebate’. Under it, in order to clear the excess stock products are offered at reduced prices.Two other techniques are given below:

1. Full Finance @ 0%: Under this method, the product is sold and money is received in instalments at 0% rate of interest. The seller determines the number of instalments in which the price of the product will be recovered from the customer. No interest is received on these instalments.
2. Samples or Sampling: Under this method, the producer distributes free samples of his product among the consumers. Sales representatives distribute these samples from door-to-door. This method is used mostly in case of products of daily-use, e.g., Washing Powder, Tea, Toothpaste, etc. Thus, the consumers willy-nilly make use of free sample. If it satisfies them, they buy it and in this way sales are increased.

Qualities of a good salesperson Salesperson plays an important role in communicating and informing about the product, thus creating awareness about the product. He/ she also tries to develop product preference by persuasion skills with the aim of making sales.A good salesperson should have following qualities:

1. Physical qualities: A saleman should be good looking, healthy and smart in appearance.
2. Psychological qualities: He should be sweet natured, possess good behaviour, should be mentally healthy, intelligent and creative.
3. Technical quality: He should be fully conversant with technical knowledge of the product.
4. Communication skills: He should be pleasing, polite and courteous. Apart from having good oratory skills, he/she should also be a good listener.
5. Honesty: He should not give false and misleading information about the product.
6. Persistent: He should be patient and confident.
7. Courtesy: He should be of pleasing personality. Being polite will always win customers.
8. Capacity to inspire trust: Salesperson should try to understand the needs of the customers and try to match them with the products available.

In the marketing process, labeling plays an important role in packaging of the product. Labeling basically provides the information about the product in the form of a tag (in cases of local unbranded products such as rice, wheat, etc.) or graphics (such as a lady applying cream on face for a face-cream).There are various functions performed by labeling which are as follows:

1. Description of Use and Contents:

The main function performed by labeling is to provide the description about the product regarding its use, application, cautions, content, etc. For example, on the bottle of a shampoo, the contents are written, along with the cautions such as keep away from children below the age of 10. Similarly, on food products such as maggie cuppa mania, a picture of noodles is there describing its appearance. Along with this, the ingredients and procedure of making it is also stated.

2. Identification and Differentiation:

A label helps in easy identification of the product. It helps the consumers to differentiate their favorable products from other products. For example, in a potato chip product, a man eating potato chips is imprinted for identification. A label also provides other valuable information such as name or address of the manufacturer, net weight, maximum retail price, batch number, etc.

3. Standardising and Grading:

A label also helps in setting grades for a product. This helps the marketers to classify the product in different categories based on certain specific quality or features. For example, a brand of face-cream comes in different categories such as oily skin, dry skin and normal skin.

4. Promotes the Production:

An attractive label helps the marketers in promoting the product as well. It helps in attracting more customers towards the product. For example, for Maggie noodles, the label says ''Taste bhi, Health bhi''. Herein, label plays an important role in highlighting the product and promoting its sale.

5. Information Required for Law:

Label also provides and mentions the information which is required to be mentioned as per the law. For example, on a packet of tobacco it is written 'chewing tobacco is injurious to health'.

The name of this technique is ‘Product Combination’. Under it, along with the main product some other product is offered to the customer as a gift.Two other techniques are given below:

1. Lucky Draw: Under this method, the customers of a particular product are offered gifts on a fixed date and the winners are decided by the draw of lots. While purchasing the product, the customers are given a coupon with a specific number printed on it. On the basis of this number alone the buyer claims to have won the gift. For example, ‘Buy a bathing soap and get a gold coin’ offer can be used under this method.
2. Usable Benefits: Under this method, coupons are distributed among the consumers on behalf of the producer. Coupon is a kind of certificate telling that the product mentioned therein can be obtained at special discount. It means that if a customer has a coupon of some product he will get the discount mentioned therein whenever he buys it. Possession of a coupon motivates the consumer to buy the product, even when he has no need of it. Such coupons are published in newspapers and magazines. Some companies distribute coupons among its shareholders. Sellers collect the coupons from the customers and get the payment from the company that issues the same.

Following are the two other techniques of promotion mix:

1. Rebate: Under it, in order to clear the excess stock the products are offered at some reduced prices. For example, giving a rebate by a car manufacturer to the tune of ₹ 12,000 for a limited period of time.
2. Discount: Under this method, the customers are offered products on less than the listed price. For example, giving a discount of 30% on the sale of Liberty Shoes. Similarly, giving a discount of 50% + 40% by the KOUTONS.

Industrial products refer to those products that are used as inputs for the production of other goods. Such goods are not meant for final consumption rather they are used as raw material and inputs by the manufacturers for the production of consumer goods. For example, machines, tools etc. are industrial products. As against this, consumer products refer to those products that are used by the ultimate customers for their personal consumption purposes. For example, toothpaste, edible oil, furniture, etc. are consumer goods. The following points highlight the difference between industrial products and consumer products.

Basis of Difference	Industrial Products	Consumer Products
Number of Customers	The number of customers is limited. For instance, oil seeds (industrial product) are used mostly by the producers of mustard oil.	The number of customers is higher. For instance, mustard oil (consumer product) is consumed by many people.
Channel of Distribution	Such products require shorter channels of distribution such as direct selling or one level channel.	Such products require comparatively longer channels before they reach the final consumer. However, channel of distribution for perishable consumer products is small.
Location	Industrial products remain concentrated only in those areas where the industries producing these goods are located.	Consumer products readily and conveniently available.
Demand	Demand for industrial product is a derived demand based on the demand for consumer products.	Demand of consumer product is not a derived demand rather sets the basis for demand for industrial products.
Role of Technical Features in Decision Making	Technical features play an important role while purchasing these products.	Such products do not involve any technical complexities in manufacturing. Thereby, technical features do not have much role in the decision making while purchasing.

Intermediaries play an important role in the distribution of consumer non-durables. They facilitate the transfer of goods from the place of production to the place where they are consumed.The following are the different functions performed by the intermediaries in case of non-durables:

1. Arrangement: An intermediary receives the supply of goods from various sources. He then sorts these goods into homogeneous groups based on their characteristics such as size, quality, etc.

For instance, an electronic goods seller receives supply of different electronic goods (T.V., washing machine etc.) and then sorts them based on their functions.

2. Collection: An intermediary maintains large stock of the goods so as to ensure easy flow of supply. For instance, the electronic goods seller maintains large stock of each type of the electronic item.
3. Allocation and Packing: This function includes breaking the larger stock into smaller units. For instance, each electronic item as well as their spare parts are packed separately.
4. Building Variety: An intermediary acquires various goods from different sources and assembles them at a single place. Thus, it maintains a variety of goods. He procures the products and then sells them in different combinations as desired by the consumers. For instance, a television and a video player are preferred together by most of the people. Thus, the retail can sell a combination of both.
5. Promotion of Product: They assist in the promotion activities undertaken by the manufacturers. For example, the manufacturers use advertising for the promotion of their product. The intermediaries can aid this process by putting banners and displays. For example, an electronic goods retailer puts up banners for various products highlighting their features.
6. Mediation: Middle men perform the function of setting a deal that can satisfy both the producers and the consumers. They negotiate the price, quality, quantity, etc. for efficient transfer of ownership so as to satisfy the need of both the parties.
7. Bearing Risk: Intermediaries acquire goods from the producers and keep them in their possession till the final sale. In the process they bear the risk of fluctuations in demand, price, spoilage, etc. For example, suppose a retailer acquires large quantities of air conditioners. However, after a few months winter sets in and the demand for air conditioners falls. Thus, the stock remains unsold and retailer would suffer a loss.